Sunday, October 11, 2015

Free Trade and 40% of the Global Economy

In the United States, unions in the manufacturing sectors oppose it, fiscal conservatives generally support it and it is always disruptive to some extent. Any free market treaty. The notion of a truly free market – the foundation of market capitalism – is a fascinating quest on a planet with virtually no free markets. Environmental and financial regulations, direct or indirect subsidies (often in the form of tax incentives or government guarantees like crop insurance) and local treatment of foreign manufactures or raw materials all weigh in to make sure that there will never really be a truly free market anywhere.

Still, the notion of dropping import duties and quotas has a strong benefit for consumers seeking the lowest prices and for nations whose products have been taxed to equalize the relative cost to higher-priced labor in more sophisticated markets with greater social welfare and compensation requirements. For high-price labor… well, there are issues.

We’ve lived with a local free trade agreement for well over a decade. “North American Free Trade Agreement (NAFTA) established a free-trade zone in North America; it was signed in 1992 by Canada, Mexico, and the United States and took effect on Jan. 1, 1994. NAFTA immediately lifted tariffs on the majority of goods produced by the signatory nations. It also calls for the gradual elimination, over a period of 15 years, of most remaining barriers to cross-border investment and to the movement of goods and services among the three countries.” Summary statement from U.S. Customs and Border Protection. With a few bumps along the way and while more than a few unions and local American businesses still rail at its terms, NAFTA has become a way of life in North American trade.

But what happens when an international treaty pushing against some grassroots Democratic Party priorities – protecting American labor against cheap foreign competition – while upholding some pretty basic free market goals for Republicans is proposed by a President who is wildly unpopular with the GOP, which controls a majority in both houses of Congress? After all, when you poll conservative sections of the country on their feelings about “Obamacare,” they uniformly express disdain and vitriol. Present the main features of that Affordable Care Act (same law) without the hated “Obama” label, and a substantial number of those same people will extoll its virtues.

It’s called the Trans-Pacific Partnership, and its reach circles nations that border on the Pacific Ocean and its adjacent seas, starting with a dozen nations from Austral-Asia, North, Central and South America to Asia, the treaty’s reach literally would account for 40% of the global economy. “To members of Congress, administration officials have repeatedly pressed their contention that the partnership will build a bulwark against China’s economic influence [China is expected to join later, by the way], and allow the United States and its allies — not Beijing — to set the standards for Pacific commerce.

“The Pacific accord would phase out thousands of import tariffs as well as other barriers to international trade. It also would establish uniform rules on corporations’ intellectual property, open the Internet even in communist Vietnam, and crack down on wildlife trafficking and environmental abuses.

“Several potentially deal-breaking disputes besides the dairy details kept the ministers talking through the weekend, and forced the repeated delays of a celebratory announcement. Final compromises covered commercial protections for drug makers’ advanced medicines, liberalized trade in sugar and a slow phaseout — over two to three decades — of the tariffs on Japan’s autos sold in North America.

“The negotiators had postponed action on ending tariffs and opening the participating countries to each other’s dairy exports until the pharmaceutical drug issue was resolved. But they miscalculated how long it would take to settle questions involving the politically powerful dairy industries in Canada, New Zealand, the United States and other countries.” New York Times, October 4th.Australia, Brunei, Chile, Malaysia, Mexico, Japan, Peru, Singapore and Vietnamround out the list.

It took five years to negotiate, but the accord was signed on October 5th at the Westin Hotel in Atlanta, Georgia, and now goes to the ratification process of the signatory nations. The U.S. Senate has three months to defeat or support that accord, and there are strong negative feelings on both sides of the aisle. Republicans, facing an election year, are loath to vote for a seminal Obama-sponsored initiative: “Senate Finance Committee chairman, Orrin Hatch (R-Utah), described the deal as falling ‘woefully short’ of goals such as opening more foreign markets to U.S. exports and boosting domestic jobs. Hatch was a strong backer of giving the White House so-called ‘fast track’ powers to pursue the pact.” Washington Post, October 5th.

On the other side of the aisle, “Opponents of the deal, including labor unions, environmental groups and liberal Democrats, have pledged to mount a final campaign to block the accord on Capitol Hill. They have criticized the TPP as a regulatory framework aimed at protecting the interests of large multinational corporations while doing little to protect worker rights and the environment. U.S. officials have said that there are chapters in the agreement with enforceable provisions to do just that.

“On Sunday morning, a handful of protesters unfurled a large banner reading ‘#StopTPP!’ They chanted ‘TPP is corporate greed. Affordable medicine is what we need’ before being removed from the lobby of the Westin hotel.” The Post.

“The timing of Monday’s trade agreement
guarantees that a deal that was going to be the subject of a fierce political
fight under any circumstances will now be thrust into an intensifying
presidential campaign, complicating its chances for approval by Congress.

"Not surprisingly, Senator Bernie Sanders of
Vermont, running for the Democratic presidential nomination, immediately
assailed the Trans-Pacific Partnership, which he has previously strenuously
objected to while the Republican candidate Donald J. Trump weighed in on
Twitter, calling the trade pact a ‘terrible deal.’

“But the politics get a little trickier on Capitol
Hill. Many congressional Democrats, for instance, have sided with labor
against the agreement, but they are reluctant to quickly reject something
that is a top priority for President Obama. Representative Nancy Pelosi of
California, the Democratic leader, said Democrats would be ‘shining a bright
light’ on the terms of the agreement.

“Most Republicans, on the other hand, are inclined
to support the trade deal, which is strongly backed by the business lobby and
was pushed by Republican congressional leaders. But they are anxious about
getting too closely tied to anything that has the president’s endorsement or
backing a deal against which Mr. Trump is whipping opposition. As the details
of the agreement trickle out in the weeks ahead, it will become more clear
just how difficult a sell the trade deal is going to be.” New York Times,
October 6th.

For the GOP, the accord represents their best case in the current global environment, and for the Dems, not voting for this treaty undermines their own president. But in a world that seems hell-bent on fracturing and pulling apart, a reaction to massive chaos and economic malaise, having a treaty that brings nations to an arena of at least a modicum of bipartisan common understanding seems almost a miracle.

I’m Peter Dekom, and whatever your party affiliation, understanding this Trans-Pacific Partnership would seem to be essential to our collective future.

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Peter's Bio

Peter J. Dekom practices law in Los Angeles and was formerly "of counsel" with Weissmann Wolff Bergman Coleman Grodin & Evall and a partner in the firm of Bloom, Dekom, Hergott and Cook. Mr. Dekom's clients include or have included such Hollywood notables as George Lucas, Paul Haggis, Keenen Ivory Wayans, John Travolta, Ron Howard, Rob Reiner, Andy Davis, Robert Towne and Larry Gordon among many others, as well as corporate clients such as Sears, Roebuck and Co., Pacific Telesis and Japan Victor Corporation (JVC). He has been listed in Forbes among the top 100 lawyers in the United States and in Premiere Magazine as one of the 50 most powerful people in Hollywood .

Mr. Dekom has been a management/marketing consultant, and entrepreneur in the fields of entertainment, Internet, and telecommunications. As a consultant to the state of New Mexico for almost a decade, he was instrumental in creating, writing and implementing legislation to encourage film and television production in the state and supervised the film loan program portion of that incentive structure until the spring of 2011. Mr. Dekom has also provided off-balance sheet, insurance-backed financing for major motion picture studios.

Mr. Dekom served on the board of directors of Imagine Films Entertainment while the company remained publicly traded and was a board member of Will Vinton Studios and Cinebase Software, among others, leaving upon change of ownership. He has also served as a member of the Academy of Television Arts and Sciences and Academy Foundation, Board of Directors, Chairman (now Emeritus) of the American Cinematheque, and on the Advisory Board of the Shanghai International Film Festival. He recently served on the Board of Governors for the America Bar Assn.’s Sports and Entertainment Law Section, where he often authored articles, delivered lectures and continues to be an active participant.

The Beverly Hills Bar Association honored Mr. Dekom as Entertainment Lawyer of the Year in 1994, the Century City Bar Association accorded him the same honor in 2004, and the Family Assistance Program named him Man of the Year in 1992 for his work with the homeless. In 2012, the American Bar Association, through its Forum on Sports and Entertainment Law, honored Mr. Dekom with its highest recognition for entertainment lawyers, the Ed Rubin Service Award. Author of dozens of scholarly articles, Mr. Dekom also is the co-author of Not on My Watch; Hollywood vs. the Future (New Millennium Publishing, 2003) with Peter Sealey and author of Next: Reinventing Media, Marketing and Entertainment (HekaRose Publishing Group 2014). He has served as an adjunct professor in the UCLA Film School, a lecturer (entertainment marketing) at the University of California, Berkeley Haas School of Business as well as being a featured speaker at film festivals, corporations, universities and bar associations all over the world.

Mr. Dekom graduated from Yale in 1968 (BA), and graduated first in his class in 1973 from the UCLA School of Law (JD). He is married to Kelley Choate, an MBA and former art gallery-owner who evolved into a renowned micro-collage artist in her own right. He also has a son, Christopher (b. 1983), who is a Duke University graduate, a Chartered Financial Analyst, a 2013 Darden (UVa) MBA graduate, and is currently an executive with a Los Angeles-based media and entertainment company. Chris' wife, Stephanie (a 2013 George Washington University MD grad), is a neonatal pediatrics 'fellow' at a major Los Angeles hospital